Policy guidelines to develop bond market

Developing Bangladesh's bond market requires clear policy guidelines to facilitate investment and ensure market confidence. Currently, financial institutions such as banks and NBFIs must seek pre-approval from the SEC, while bond issuance-even private placements-requires Bangladesh Bank's permission. Establishing a framework of parameters under which NBFIs can issue bonds without prior approval would streamline the process and encourage market growth.

Equally important is strengthening the secondary market. Transparency, diversity, and liquidity are essential for evaluating bonds and generating capital gains, which depend on a robust secondary market. Corporates often rely on banks for long-term finance, but this can disrupt their asset-liability ratio. Promoting portfolio diversification through multiple asset-backed bonds and introducing effective hedging mechanisms, including derivatives, would reduce market risks and build investor confidence.

Encouraging bond funding would support infrastructure projects, reduce reliance on bank loans, and attract corporate participation. Measures such as loans against bond investments, tax incentives for public-listed companies, and expanding institutional investors like mutual funds, life insurance, and pension funds would further strengthen the market. Retail investor education and digital platforms for faster bond registration and trading are also essential to broaden the investor base and enhance secondary market activity.

A structured, transparent, and investor-friendly approach is crucial to making Bangladesh's bond market a reliable source of long-term finance.

Muntasir Mahmud

North South University